V.1.1 - A Decentralized and Cooperative Protocol for Next Generation Logistics

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V.1.1 - A Decentralized and Cooperative Protocol for Next Generation Logistics

A Decentralized and Cooperative Protocol
      for Next Generation Logistics

    1. Executive summary                                     11. Legal Disclaimer

    2. Introduction

    3. dKargo Platform
     3.1 dKargo : A Decentralized and Cooperative Protocol
        for Next GenerationLogistics
     3.2 dKargo’s Solution
     3.3 dKargo’s Value Proposition

    4. dKargo Business Flow

     4.1 Provide Optimal Route
     4.2 Payment
     4.3 Settlement
     4.4 Recording Data
     4.5 Logistics Data Transaction Market
     4.6 Transaction Fee
     4.7 Guarantee and Insurance
     4.8 Mediation of Disputes
     4.9 Value-added Service Provider

    5. dKargo’s Economic Model
     5.1 DKA Token
     5.2 DKA Token Incentive Pool
     5.3 DKA Token Incentives Distribution

    6. dKargo Technology Description
       – Key elements
     6.1 dKargo Platform Structure

    7. Business Partner
     7.1 Flagship Partner
     7.2 Attract Additional Partners

    8. Roadmap

    9. Timeline

    10. Team & Advisors
     10.1 Team
     10.2 Advisor

                                                             dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
1.    Executive summary

         The logistics industry serves as the veins of the economy. The industry is poised to grow enormously
         to reach USD 15.5 trillion by 2024. At the same time, the industry is facing transformational
         change; the rapid growth of the e-commerce market, the transition from business-to-business
         (B2B) to business-to-consumer (B2C) and consumer-to-consumer (C2C), and the expansion of
         cross-border trade. With such changes in the market, customers now have a higher expectation
         for more cost-effective, flexible and faster logistics services. Moreover, existing services focused
         on storage and delivery transportation must go beyond to meet the growing demand for a wider
         variety of services. Nevertheless, incumbents are stuck in the old ways, competing against each
         other and are failing to improve services to meet their customer demands.

          The logistics industry is facing a structural problem – due to different interests of participants
         in the logistics network, no credible protocol exists that enables transparent sharing of data.
         This makes collaboration inefficient or nearly impossible. The participants are fiercely competing
         against each other to achieve economies of scale by investing heavily in all ranges of service
         from first-mile to last-mile delivery. However, this has led to double-investment and crippled the
         industry with inefficiency. Even in international logistics where collaboration should be relatively
         easy to achieve, complicated procedures are hindering collaboration because of inefficient
         data sharing. This inefficient structure for collaboration has left no choice for logistics service
         providers but to concentrate their services in freight transportation and storage. Henceforth, the
         possibility of creating greater added-value is decreasing and the cost is rising, and yet the quality
         of logistics service is falling.

          As a blockchain-based logistics protocol, dKargo aims to address challenges that hinder
         collaboration in the logistics industry and build a new type of an efficient logistics network.
         dKargo will enable participants to use credible and generally standardized data on a blockchain-
         based public ledger. dKargo’s plans for the development of the logistics industry are as follows:

         1 Maximizing Efficiency of the Logistics Industry : A.I. Route Optimization
         Suggest optimal logistics route in which various participants can collaborate and thereby
         maximize the overall efficiency of the logistics network

         2 Evolution of Logistics Ecosystem : Whole-mile Logistics
         Build whole-mile logistics and a network that can utilize different modes of transportation other
         than the conventional freight transport modes and ultimately create an entirely new logistics

         3 Boundary-Crossing Innovation in Logistics : Interconnected Logistics
         Provide a wider range of logistics services to deliver new value by offering various logistics-
         related services

1                                                                           dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
Furthermore, dKargo has a reward system where participants can gain additional incentives
    for just playing their parts. They can contribute to building a more efficient logistics network by
    providing logistics services and uploading data, and in return, they can earn additional incentives.

     dKargo is providing a new form of logistics service enabling various players to participate in
    the platform which was previously impossible. For example, not only traditional logistics service
    providers like courier companies but also motorcycle carriers, users of public transportation,
    individuals and SMEs can all participate. Moreover, dKargo enables other competent participants
    who are operating freight transportation and storage businesses to collaborate. Through
    collaboration, logistics-related sectors such as payment, repairs, and inspection, which are all
    important to meet the consumer needs, will add new value to the logistics industry.

     To achieve dKargo’s objectives, dKargo will expand partnerships with the incumbents. deleo,
    a startup company specializing in international delivery service, will join dKargo as an early flagship
    partner. deleo is a rapidly growing company, raising Series C funding with the valuation of KRW
    100billion. Currently, Kakao Investment, Lotte Global Logistics, and other major Korean venture
    capital firms are deleo’s shareholders. deleo also formed a strategic partnership with the U.S.
    Postal Service (USPS). deleo has a strong competitive edge in cross-border delivery – deleo’s
    major business network in each country and its infrastructure will be keys to dKargo’s success.

     Another flagship partner of dKargo is KakaoPay Express, a logistics service provider from Kakao.
    Kakaopay is an easy payment service provider from Kakao which is Korea’s no.1 mobile platform
    with more than 80% of Koreans using this platform. Kakao, alongside Lotte Global Logistics, a
    major Korean logistics service provider, established a joint venture Easygo, which is responsible
    for providing KakaoPay Express. More than 50 million active users are familiar with Kakaotalk’s
    interface; Lotte Global Logistics has a wide range of logistics system and delivery location points
    such as convenience stores, and deleo is an expert in cross-border delivery. Combining all these
    strengths together, KakaoPay Express is providing flexible logistics services.

     As an open platform, dKargo encourages all businesses that have relevance to the logistics
    industry to participate in the platform. By building a logistics ecosystem that fairly distributes
    incentives according to the participant’s contribution, dKargo aims to attract various partners to
    the dKargo platform.

     Ultimately, dKargo aspires to provide efficient logistics services where everyone, including users,
    logistics service providers, and consignees, can gain greater benefits.

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2.    Introduction

           Increasing consumer demand for flexible logistics services

          18                                                                                                                100
          16                                                                                                                90
                                                                                81.61                                       80
          14                                                         76.98
                                                             72.6                                                           70
          12                                      68.51
                                 61.14                                                                                      60
          10             57.81
          8                                                                                                  15.52
                                                                                               14.35                        40
          6                                                          12.33
                                         9.96     10.68                                                                     30
                         8.72    9.31
          4     8.18

          2                                                                                                                 10

          0                                                                                                                 0
                2015     2016    2017    2018     2019       2020    2021        2022          2023          2024

                                 Market size (USD Trilion)              Freight volume

          The global logistics market is expected to grow from USD 9.9 trillion in 2018 to USD 15.5
         trillion by 2024, registering a compound annual growth rate (CAGR) of 7.5%. Many changes are
         taking place in the industry as the market is witnessing substantial growth in an ever-changing
         business environment. For example, the industry landscape is shifting from B2B based industrial
         structure towards B2C and C2C structure, due to the increasing growth of the e-commerce
         market. Cross-border trade is surging, thanks to the globalization of technology. On-demand
         solutions have expanded to offer various logistics services to customers and now, customer’s
         expectations are higher than ever before. Such changes in the market have translated into a
         demand for flexible logistics services: faster delivery reaching customers anytime, anywhere at
         a reasonable cost regardless of the logistics companies’ business cycles.

3                                                                            dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics

                                     Business                                  Advancement of
                                     expansion                                 logistics service

                                                       Quality growth
    expansion   B2C

                                    Quantitative                                     Consumer
                                  expansion in the                                   experience
                                  logistics market                                   enrichment

                                  Domestic                               Global

         Incumbents failed to meet the needs of flexible services

        Despite the growing demand for more flexible and efficient logistics services, many logistics
       companies are struggling to keep pace with rapidly changing customer demands. Customers are
       now looking for local, real-time, and personalized deliveries. However, the market currently relies
       on the hub-and-spoke model where individual shipments are hauled from regional warehouses to
       a central shipping hub where they are sorted and bundled. Under this model, it is difficult to meet
       customer demands. Inflexible logistics services can trigger other challenges in different business
       environments. For example, logistics service providers in rural areas have less freight traffic and
       are likely to deliver one or two goods to the delivery destination. On the other hand, in urban areas
       where delivery destinations are concentrated, excessive traffic leads to inefficient deliveries.

         Developed countries struggle to meet diverse customer needs

        With the expanding e-commerce market in developed countries, there is a greater demand for
       more flexible logistics services that ship all different types of goods. But, if the incumbents want
       to provide more flexible logistics services to customers, then the cost increase is inevitable.

        In Korea, the logistics industry has achieved substantial growth thanks to the development of
       e-commerce and the logistics network, but growth in terms of quality has stalled. According
       to the Korea Integrated Logistics Association, the average unit price to deliver a single parcel
       in Korea’s courier, express and parcel (CEP) market decreased only by 7% from 2010 to 2016.
       Under such market conditions, providing flexible logistics services would only lead to price hike
       and efficiency loss.

4                                                                         dKargo |    Decentralized and Cooperative Protocol for Next Generation Logistics
The United States is also witnessing an increase in freight traffic with the rise of e-commerce.
    Customer expectations for more flexible logistics services are now high whilst many customers
    remain price-sensitive to delivery fees. Industry titans like Amazon are using cutting edge
    technology and integrating logistics and distribution together to meet such conflicting needs of
    the market. Nevertheless, this has left the incumbents with no choice but to increase the price
    so they can provide flexible logistics services.

      Emerging markets struggle to maintain efficient logistics infrastructure

     In emerging markets, logistics services have not scaled into the market due to a lack of efficient

      For example, India has experienced rapid economic growth. As the economy grew, India’s
    shipment volume has also rapidly increased and logistics related industries such as warehouses,
    freight forwarders, and container businesses have all grown. However, due to inefficient business
    operation and a lack of infrastructure, India’s logistics network has reached its capacity and failed
    to support India’s continuing economic growth. For example, the logistics network is divided up
    by freight transportation companies, so it is difficult to operate the network efficiently. India’s
    limited infrastructure coupled with a lack of ICT creates more challenges to India to raise the
    efficiency of its logistics network through collaboration.

     Limited infrastructure is also a problem for Southeast Asia. This is one of the major issues for
    many Southeast Asian countries because relative to the size of their territories, many countries
    lack the infrastructure to connect major cities with remote areas or little villages in islands. Only
    10% of the roads are paved in Cambodia and Laos, making it difficult for vehicle-based logistics
    services to reach many areas in these countries.

     Indonesia consists of more than 17,000 islands so it is difficult to build a logistics network
    that connects all the islands. Also, among the 47 ports in 9 South East Asian countries, with
    the exception of Singapore, Thailand, and Malaysia, most of the ports have very low levels of
    performance and capacity for cargo handling, making it even more difficult to build a logistics

     In order to address these challenges in Southeast Asia, an expended logistics network which
    includes alternative transportation modes such as bicycle delivery, and a system to efficiently
    utilize logistics infrastructure have been suggested as solutions. Nevertheless, at the moment
    there is no credible protocol that enables the operation of the expanded logistics network.

      Data without trust makes it impossible to provide flexible logistics services through

     International delivery service providers and local logistics companies are cooperating in cross-
    border trade. For example, international courier companies like FedEx and DHL are partnering
    with small businesses and national postal companies around the world to provide international
    delivery. However, such collaboration is currently inefficient because no credible protocol exists
    and as result, exchanging data is very difficult. This is because each company runs its own label

5                                                                      dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
system and only a fraction of data about each cargo is shared. Due to a lack of transparency in
    transactions, complex procedures are required to verify transactions. Such inefficiency in the
    system ultimately leads to cost increase.

     For domestic logistics, every participant in the logistics network invests heavily in all routes from
    first-mile to last-mile delivery to secure economies of scale. However, this makes collaboration
    even at the smallest level difficult. Participants have, in fact, made double-investment by
    investing inefficiently throughout the industry and in return, failed to achieve economies of scale.
    In theory, collaboration should be possible by combining the freight volume from each route
    so that participants can achieve economies of scale and enjoy mutual benefits. However, the
    reality is quite different. There is a possibility of the data-tampering of the frights’ conditions.
    Furthermore, standards of each data are all different and a sense of mutual trust is weak due to
    silo logistics structure. All these factors make collaboration often challenging.

     Furthermore, logistics services are limited to freight transportation and storage due to lack of
    collaboration. This hinders the possibility to create added value to the industry. As customer needs
    diversify, customer expectations are growing for a variety of logistics-related services such as
    payment, packing, inspection, and repairs. Therefore, to some extent, collaboration with various
    service providers is essential to provide a wide range of logistics-related services to customers.
    However, under the current industrial structure, it is difficult to meet customer demand without
    collaboration taking place.

6                                                                       dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
3.    dKargo Platform

         3.1 dKargo : A Decentralized and Cooperative Protocol for Next Generation

          In order to solve the problems of the current logistics system, it is essential to connect the
         separated participants of the value chain to create a flexible one. In this regard, participants
         in the logistics system must trust each other and collaborate for their mutual benefit. However,
         the heavily competitive logistics system makes collaboration difficult as data resources aren’t
         being shared. Even in international logistics where collaboration is relatively important, efficient
         collaboration is not taking place because no credible logistics protocol exists.

          dKargo aims to build a decentralized and cooperative protocol for next generation logistics
         to address current challenges in the logistics industry. Efficient collaboration can be achieved
         with credible logistics data provided through dKargo. The platform will eliminate the risk of data
         tampering by using a blockchain-based protocol technology and provide a foundation for its users
         to collaborate without having to trust the other party. Also, smart contracts will solve the problem
         of unfair distribution of profit, which is a major obstacle to collaboration. This can be done without
         complex processes by allowing participants to earn incentives that reflect their contribution. This
         will allow dKargo to provide an environment for an efficient logistics network where participants
         can collaborate and focus on their strengths.

          To build this platform, participants must voluntarily share their data. On the platform, each
         participant will receive incentives for providing data about their freights and logistics service.
         Incentives will encourage businesses such as freight transportation carriers, warehouse
         operators, and logistics-related service suppliers as well as individuals like deliverymen,
         warehouse employees, and customers to voluntarily participate in the platform. More incentives
         will be provided as the platform grows and participants will be able to receive fair incentives for
         their contribution to the platform’s growth.

          Voluntary participation will lead to further collaboration with a variety of service providers.
         The current scope of logistics service will be widened, and customers will be able to enjoy new
         services that meet their needs other than freight delivery. Such services include basic services in
         freight transportation such as packaging but also other services that create added value such as
         freight inspection and repairs. However, such needs aren’t met most of the time except in specific
         sectors such as 3PL (Third-Party Logistics), and fulfillment. On top of that, currently available
         services aren’t connected in an effective system but are instead relying on phone calls and
         cumbersome paperwork. dKargo aims to seamlessly connect such services within the logistics
         system to revolutionize the customer experience. The existing logistics system focuses on simply
         delivering freight. What dKargo is trying to provide is the advanced model of the existing logistics
         system that creates added value.

7                                                                            dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
3.2 dKargo’s Solution

      Providing credible data through a public ledger based on blockchain

      dKargo will provide a credible public ledger by recording information that is needed for
    collaboration such as the freight’s contract information, freight’s condition, the participant’s
    previous records, and their available resources on the blockchain. This will lay the foundation of
    the logistics platform. For example, the platform participants can easily access the recorded data.
    At the same time, the tamper-proof data will provide the transparency needed for collaboration.
    This will allow dKargo to provide a safe environment for collaboration and solve the problem of
    lack of trust which was a major drawback in the logistics industry.

     In order to ensure collaboration among participants, it is essential to clearly acknowledge the
    contribution and responsibility of each participant to minimize disputes. Currently, data isn’t being
    shared among logistic companies because each company is creating and managing their own
    data. If a problem occurs under such circumstances, trusting another company’s data is difficult
    since data owners can tamper the data to their advantages. For example, a problem can occur
    if temperature control is mismanaged during the transportation of pharmaceutical products in
    cold chain. However, under the current structure, it is possible to tamper the data of the previous
    storage temperature and avoid any responsibility. Such unreliable data will make it difficult to
    clarify where the responsibility lies when a problem occurs during collaboration. Furthermore, the
    high costs spent to prevent such disputes often defeats the purpose of collaboration.

               Contract data                                                    Freight data

               Data on previous                                          Data on available                              $
               records                           Blockchain                     resources

     Blockchain technology is characterized by transparency and prevention of data tampering. These
    traits are suitable for providing credible data to the platform participants. Through blockchain,
    dKargo can provide credible data at low prices to the platform participants and minimize disputes
    that may arise due to untrustworthy data.

    The credible data recorded on dKargo’s platform will allow participants to clarify their contribution
    and responsibility for their services. The logistics service’s goal is to provide safe freight delivery.
    When this falls through, identifying who is responsible for compensation becomes a contentious

     This forces companies to make complex contracts to minimize collaboration risk or just refuse
    to collaborate all together. However, on dKargo’s platform, all contract and freight information
    of every stage will be recorded on the blockchain, so it will be clear who bears responsibility.
    Hence, participants will be less likely to face disputes without having to deal with any complex
    and cumbersome paperwork.

8                                                                        dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
Participants are sharing their available resources and transaction history on the dKargo platform,
    which allows them to find their optimal partners. Under the current structure, even if participants
    want to collaborate, it’s difficult to find ideal partners. Even if they do find them, it’s difficult to
    confirm if they have the necessary resources at the time of collaboration. Limited information
    makes collaboration difficult because it increases the costs of finding a partner or creates an entry
    barrier. dKargo’s participants can access credible data about their partners’ history on the public
    ledger. Also, data on available resources will help participants find their ideal partner at the time
    of collaboration. This will allow each participant to not only increase the efficiency of their own
    logistics service but also make the entire logistics network more efficient by optimizing the use of
    their limited resources.

    3.3 dKargo’s Value Proposition

    dKargo’s goal is to use blockchain technology to create an efficient, flexible logistics network that
    was impossible to create in the current, centralized logistics industry. dKargo plans to maximize
    participation by connecting users and providing more incentives to voluntary participants.
    dKargo will provide the following to create an efficient, flexible logistics network:
                        Expanding sectors of logistics industry

                                                                            Value 3

                                                                  Traditional logistics industry

                                                                            Value 1                        Value 2
                                                                            A.I. Route                     Logistics

                                                                                                   Expansion of logistics network

       Maximizing Efficiency of the Logistics Industry: A.I. Route Optimization

     dKargo will provide a new level of logistics services through flexible collaboration among
    participants that was impossible to achieve in the existing system. From the customer’s
    perspective, freights were often delivered and stored in an inefficient way due to a lack of

9                                                                                                                    dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
collaboration. For example, a freight from one city can be sent out to a distribution center outside
     the city, only to be delivered back to the city. Another example would be customers having to
     wait for their parcel to be collected at their homes. These problems can be solved if logistics
     service is performed with diverse participants in a flexible, purpose-driven manner. dKargo will
     design an optimal route through data sharing and collaboration to build a better functioning
     logistics network.

     Currently, logistics service is carried out by a single company or through a few participants who
     are closely connected to one another. This can be problematic because that single company is
     solely responsible to carry out all the tasks even in sectors where they don’t have expertise. As
     a result, relatively less competent participants will provide poorer services than more qualified
     participants existing in the market. This leads to a cost increase and poor customer experiences.

      The most efficient participant for each sector of the supply chain will provide services which
     will increase the efficiency of the overall logistics network. Customers can find the most optimal
     logistics network route based on the recorded data of each participant on the blockchain. This
     will allow customers to have their goods delivered to them in the most efficient way. And logistics
     service providers can focus on their strengths and make better, more efficient use of their limited
     resources. dKargo provides an opportunity for each participant to enhance their strengths,
     thereby raising the efficiency of the entire logistics network.

                         Freight headed to A                                   Freight headed to A

                                               Destination A                                                Destination A

                         Freight headed to B                                   Freight headed to B

                                               Destination B                                                Destination B
            Company A                                          Company A

                         Freight headed to A                                   Freight headed to A

                                               Destination A                                                Destination A

                         Freight headed to B                                   Freight headed to B

                                               Destination B                                                Destination B
            Company B                                          Company B

      The logistics industry is one of the main industries where economies of scale play into factor,
     which means that the more freight volume a company has, the lower their operating costs will
     be. Until now, logistics companies competed to gain more freight volume by using economies
     of scale to their advantage. Realistically speaking, there are limitations to the freight volume a
     single company can handle. There are also situations where delivery trucks are starting their
     delivery half-empty or where the delivery period is delayed because trucks have to wait to be
     fully filled. Such inefficient operation ultimately results in a unit price increase and poor customer

10                                                                         dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
In this regard, dKargo offers a solution to maximize economies of scale by encouraging
     collaboration among participants to gather the freight volume for the same route. Each
     participant can find each other’s contractual information on the public ledger available on
     dKargo’s platform and trade their delivery volume, if necessary, to maximize the freight volume
     for each route. Available resources and logistics data that is generated by real-time tracking on
     dKargo’s platform will also be used for machine learning and help participants to fully utilize their
     resources. Individual participants can minimize the time required to obtain the freight volume
     needed for each route and also create economies of scale that wasn’t possible in the current
     system. dKargo can provide a better customer experience by drastically lowering the cost of
     logistics services while reducing unnecessary operational time.

       Evolution of Logistics Ecosystem: Whole-mile Logistics

                                          INDIVIDUAL            INDIVIDUAL
                                           (ON FOOT)            (BICYCLES)


                                          PARCEL                CARGO TRUCK                  CONVENIENCE

                                                                   CURRENT                  EXPANDED              EXPANDING THE SCOPE
                                                                   LOGISTICS SYSTEM         LOGISTICS SYSTEM      OF LOGISTICS SERVICES

                                         WAREHOUSE              MOTORCYCLE


                           COIN LOCKER

                                                   TAXI         INDIVIDUAL
                                                               (PERSONAL CARS)

11                                                                               dKargo |    Decentralized and Cooperative Protocol for Next Generation Logistics
Flexible collaboration can create a new level of logistics services. Currently, logistic service
     providers don’t collaborate with each other but they also do not collaborate with other logistics-
     related service providers in the same line of business. For example, Korea’s courier companies and
     short-distance motorcycle carriers have the same goal of delivering goods. However, these two
     service providers don’t collaborate to provide the same service. Each logistics service provider
     has their own strengths and weaknesses which can complement each other if they collaborate
     together. Ultimately, collaboration among various participants can provide an efficient logistics
     service that was impossible to provide in the past.

      The new environment of collaboration that dKargo is offering will attract new participants into the
     logistics ecosystem. Not only existing participants such as courier companies, motorcycle carriers,
     cargo truck carriers, and logistics warehouse operators but also new participants who were
     irrelevant to the logistics service such as commuters, food deliverymen, taxi drivers, self-employed
     people, and coin locker service providers will be able to work together on the platform to provide
     better logistics service to customers. For example, instead of a deliveryman collecting parcels
     door-to-door, individuals in that area can collect and move the parcels to a self-employed person’s
     warehouse, which acts as a city warehouse or access center. The deliveryman then can collect the
     gathered parcels, which will help provide a more efficient logistics service. Moreover, individuals can
     place parcels in a coin locker and another individual can deliver them to their destinations via public
     transportation such as subways and buses. Completely new types of services can be provided,
     such as a courier service companies moving the freight to a local warehouse where individuals can
     deliver the parcels via bicycles to the destinations that are difficult to reach by car. The logistics
     ecosystem is transforming to embrace diversity and is now moving away from the existing method of
     strictly dividing the first mile and last mile delivery. It is becoming a whole-mile logistics which uses
     the entire logistics network in a more efficient way. dKargo provides an environment where a variety
     of participants collaborate together on each step of the supply chain and create new services. So,
     participants can record their data and easily participate in the logistics network and experience new
     services on the platform and hence, earn extra revenues.

       Boundary-Crossing Innovation in Logistics : Interconnected Logistics

      During the freight delivery process, there are some market needs that cannot be met by simple
     delivery and storage services. Services directly related to freight delivery such as packaging,
     transportation, storage, categorizing, and customs clearance are needed as are other related
     services such as payment, verification, inspection, and repairs. For example, when cargo is shipped
     for commercial purpose, the shipper must receive payment securely from the buyer. That is why in
     regions where finance is underdeveloped like in Southeast Asia, payment is included in the logistics
     service. An example of such a service would be cash on delivery. Another example would be a third-
     party regularly checking the freight’s condition for freight that needs special packaging or extra

      B2B services offering comprehensive proxy fulfillment services such as storing, packaging, and
     transportation already exist to provide a more convenient customer experience. However, these
     services aren’t available for individual customers. Even for some businesses, such services are
     performed under a closed private contract and thus have limitations to provide flexible services.

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Smart Contract

                               ((C) AS RECEIVER)                          ((B) AS SERVICE PROVIDER)

     Shipper (A)                                                                                                      Consignee C

                                                     3RD PARTY B
                                                 Packaging, Repairs,
                                             Manufacturing, Inspection, etc.

      dKargo will create new logistics services, which were not possible before, by connecting smart
     contracts with diverse services necessary for users. In order to do so, dKargo will design a contract
     to deliver the freight to the consignee while enabling other necessary offline services without any
     extra effort, and also will use smart contracts for performance guarantee and payment. This
     will allow dKargo to provide a wider range of logistics services that can also increase the value
     of freight transportation. Such new services include packaging, storing, inspection, repairs,
     washing, and conditional payment. dKargo’s goal is to connect relevant services to logistics
     together to provide a more customized experience.

      This expanded scope of logistics can address some of the problems exist in many different
     sectors. In order to better understand, some case examples in the P2P second-hand trading
     market are useful. For instance, the entire P2P second-hand trading market’s size has almost
     reached KRW 18 trillion. However, second-hand goods are often traded inefficiently due to the
     market’s structural limitations. The risk for fraud or dispute is constantly present because it is
     difficult for the seller and buyer to trust each other and also trust the quality of the goods. For
     example, there are cases where the seller ships the goods but fails to receive payment, or when
     the buyer sends the money but fails to receive the goods. Even if both sides have no intention of
     cheating, disputes can arise because the two parties may disagree on the value of the\goods.
     Oftentimes, a middleman is paid a high commission or despite the inconvenience, both parties
     meet face to face to strike a deal in order to minimize such risks.

      dKargo has come up with a solution to solve the problems riddling the second-hand trading
     market. It is to connect a variety of services. Imagine a scenario when a buyer and seller are
     trading a second-hand good. In this case, the biggest problem is that the both parties are unsure
     whether the counter party will send the promised payment and good to each other or not. If they
     want to close the deal, then they have no other choice but to trust each other. And often, some
     incidents occur where a buyer makes a payment and receives a brick in a parcel, or a seller

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sends the good but never receives a payment. dKargo can easily solve this problem – when
     making a logistics contract at dKargo, a verification service of the goods by the participants
     responsible for first-mile and last-mile delivery can be added. So, when receiving the goods, the
     participants of first-mile and last-mile delivery can verify whether the goods are the correctly
     ordered goods and record them on the blockchain, which can be further used as an evidence
     when dispute occurs. Furthermore, by linking these records for payment with smart contracts,
     any issues regarding receiving payments can be resolved too. These processes allow the logistic
     network participants to earn extra income and thereby provide additional value to all users and
     participants of the network. Moreover, if the parties find difficult to reach a mutual agreement
     about the value of a traded good, a third-party expert can make an intervention during the trading
     process to appraise the value of the good and hence, this type of issue between the two parties
     can be resolved. On top of this, a variety of other necessary services in the second-hand trading
     such as repairs, cleaning and storage will be available so that users can enjoy these services
     more easily.

      The abovementioned example of the second-hand trading market is a mere fraction of the type of
     services that can be provided. Connecting logistics to various services can be realized in more diverse
     ways. Through the flexible collaboration of participants and smart contracts, almost all types of online
     and offline services can be connected to logistics, which will solve many challenges we face.

14                                                                        dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
4.   dKargo Business Flow
                                                                 dKargo Ecosystem

                                                         Logistics Data Market

                                     Research Institute Financial Institution             Company                 Government                  Others

                                                                  Logistics data consumer

                                                                                  Data               DKA


                                              Data            DKA                                                                                Payment

           Data    DKA                Information service provider                Data               DKA           Settlement service provider                             DKA     Data
                           Payment Optimal route/
                                   information service                                                                                       DKA / Fiat

                                                               Logistic service participants

                                                                         Expanded logistics network

                                                  +                      +                +                        +                   +
             Shipper                                                                                                                                            Freight
                         Freight   Courier companies Motocycle carrier       Individual       Public transtport          Air carrier           ETC
                                                                                                                                                               + Service

                                                                              Freight                Freight + Service

                                                                                  Related services

                                                         +                       +                        +                            +
                                          Packaging              Repairs                Inspection                Manufacturing               Others

                                                             DKA                                                                           Guarantee

                                             Staking pool                                                                          Insurer

      4.1 Provide Optimal Route

       dKargo’s service starts with a shipper making a request for a service they want and then receiving a
      recommendation for an optimal route. The shipper will record information such as the freight’s type,
      size, weight, destination, delivery deadline, transportation costs, safety precautions for handling, and
      need for other logistics-related services onto dKargo’s platform. dKargo will then recommend the
      optimal route. During the early stages of dKargo, the recommendations will be made based on the
      information on dKargo’s blockchain. However, in the long-run, business operators with expertise in
      route optimization will eventually provide solutions. This, in turn, will allow dKargo to provide the most
      efficient logistics route to its users.

15                                                                                                                                     dKargo |        Decentralized and Cooperative Protocol for Next Generation Logistics
Inspector A   Company A                                       Company A

                         Company A     Inspector B   Company B   Company A      Warehouse A          Company B

        Shipper          Company B     Inspector C   Company C   Company B      Warehouse B          Company C         Receiver

                         Company C     Inspector D   Company D   Company C      Warehouse C          Company D

                                       Inspector E   Company E                                       Company E

       The shipper then can select the route that best suits their purpose among the various
     recommendations. The shipper will sign a logistics contract with the service providers of the
     route of their choice. The contract will be recorded on the blockchain and a smart contract for
     payment will be written up. Also, the shipper can draw up a conditional smart contract with
     their service providers. For example, if a service provider successfully makes a delivery within a
     timeframe required by the shipper as a condition, they will be rewarded with incentives. Users
     can make such options to create a logistics service that best fits their purpose.

     4.2 Payment

      After a logistics service contract is signed, the users must make payments. The payments include
     not only the costs accrued during logistics processes but all financial transactions that took place
     between the shipper and the consignee. All payments can be processed in a batch. dKargo offers
     users a variety of payment for their convenience. Users can select existing payment methods such
     as cash and credit cards along with DKA tokens, which is a cryptocurrency issued by dKargo.
     Those who are not familiar with cryptocurrency can still enjoy the values and benefits which dKargo
     provides. Furthermore, collaboration with existing payment service providers such as Kakaopay will
     help to lower the entry barrier and help the platform scale into the market.

      Some participants on the dKargo platform may have different preferences for fiat money or DKA
     tokens as their payment methods. Also, the time when a contract is made and when the payment
     is settled may differ. To resolve any confusion that may occur due to the time differences between
     payment and settlement, or methods of payment, a settlement service provider is needed. Any
     settlement service provider with proven capability to convert fiat money and DKA tokens can
     participate in the platform. Further information about ‘settlement service provider’ will be explained
     in section 4.9 Value-Added Service Providers.

16                                                                           dKargo |     Decentralized and Cooperative Protocol for Next Generation Logistics
4.3 Settlement

                                              Smart Contract
           Information on            Information on            Information on                      Information on
           forwarded freight         forwarded freight         forwarded freight                   forwarded freight
                               PAY                       PAY                           PAY

      The settlement made by logistics service users will be paid to participants through a smart
     contract. Each participant can request payment for their contribution and will receive payment
     when the freight is confirmed to be intact. Once it is verified that no problems occurred to the
     freight when the participant was carrying out their service, the payment will be made automatically
     via the smart contract. Each participant decided in advance about the ratio of fiat currency and
     cryptocurrency they would like to be paid in, and the payment will be made according to their
     wish. If the freight is damaged, the payment will be deferred and temporarily held by dKargo.
     Once the consignee uploads data about the freight’s status and confirms it is intact, the deferred
     payment will be made. If the freight is damaged, compensation will be made through either a
     deposit (4.7 Guarantee and Insurance) or an insurance firm (4.9 Value-added Service Providers).

     4.4 Recording Data


      In order to operate the platform, diverse platform participants must record data about freights
     and logistics services. dKargo will provide DKA tokens as incentives to encourage participants
     to voluntarily provide data in the platform. This will encourage participants to use dKargo to earn

17                                                                         dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
extra incentives that they couldn’t have received in the current logistics system.

      Participants can earn incentives by uploading various types of data on dKargo. Shippers
     can receive incentives for uploading freight and contractual data and writing a review on the
     participant who collected the freight. Logistics service participants can earn incentives by
     uploading data about their available resources and how the freight is transported and stored. For
     consignees, they can input data about the freight’s final conditions and review the participant
     who provided the last-mile delivery.

      Participants will be encouraged to input data at the moment they received the freight to raise
     data credibility. The reward system is designed to provide less compensation the longer it takes
     for the participant to input the data. Also, in the long-term, an IoT sensor will be used to monitor
     the freight’s condition in real-time, which will solve the problem of data credibility.

      incentives will be provided from the incentive pool, which is eatablished with tokens from
     transaction fees and partially from the reserve. The amount of compensation will depend on how
     much each participant contributed to the platform. This will be further explained in dKargo’s
     Economic Model.

     4.5 Logistics Data Transaction Market

                                             Right to use data

                Data uploader                                                       Data user

                       Data                                                 Information on data

                                               Data Market

      The data on dKargo’s platform can create immense value for various industries related to the
     logistics industry. The public sector, including the government, research institutes and the
     private sector such as logistics and IT companies and financial firms are all data consumers.
     dKargo will provide a data transaction market for data uploaders and data consumers that
     reflects the market’s needs to maximize the value of data on dKargo’s platform.

18                                                                     dKargo   |    Decentralized and Cooperative Protocol for Next Generation Logistics
Data consumers can use the data transaction market to easily search for data owners with
     specific traits and have the right to use data by paying DKA tokens to the data provider.

      When uploading data, data uploaders can select to what extent their data will be disclosed
     on the platform which will allow them to autonomously exercise their data rights. The average
     market price will be set as a default price of data. This will allow data uploaders to use the data
     transaction market without difficulty. However, the uploader reserves the right to adjust the price
     of the data if they wish to. In this regard, dKargo will provide participants further opportunity to
     earn extra revenues by uploading their data.

     4.6 Transaction Fee

      A portion of the payment and settlement must be paid to the platform as a transaction fee.
     The transaction fee will be used to provide compensation to platform operators and users. The
     total transaction fee will be set at a lower rate than the fees of existing payment settlement
     providers, which will be of more profit to the platform participants. If participants make and
     receive payment in DKA tokens, they can use the platform at a lower rate than using fiat money.
     This will encourage participants to use DKA tokens, as they will reap more benefit from it than
     using fiat money.

     4.7 Guarantee and Insurance

                    The amount of tokens staked        +           The level of guarantee
                                                                 from insurance companies

      Participants must stake DKA tokens as a guarantee for their service.For collaboration-based
     logistics service to be possible, all participants must faithfully perform their tasks. If participants
     fail to carry out their tasks, they must take responsibility for any costs that occurred. dKargo
     participants must stake a certain amount of tokens as a deposit, which will be used as
     compensation when a problem occurs.

      The tokens that each participant staked is a guarantee of that participant’s service. To receive
     more contracts on dKargo’s platform, participants must stake more tokens that are proportionate
     to the number of contracts they signed. The amount of tokens each participant must stake is

19                                                                       dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
calculated based on their ratio of risk, which is based on their transaction history. Token staking
     provides participants a reason to faithfully carry out their contract. Participants can increase the
     amount of staked tokens per contract, which will help to raise the participant’s credibility. It will
     also put them in a more favorable position to earn more contracts on the platform.

      If the participant wishes to sign more contracts than the amount that their staked tokens
     guarantee, an insurance company can step in to provide a guarantee for the new contracts.
     Participants will pay the premium via tokens, and the insurance company will pay a portion of
     their earnings to dKargo as a transaction fee.

     4.8 Mediation of Disputes

     As dKargo provides logistics services based on collaboration, various type of operational disputes
     can emerge. dKargo can minimize such disputes by recording the entire logistics process on the
     blockchain. However, there will be instances where a third-party must mediate the dispute.

      When a conflict occurs, The steering committee mandated to mediate will take actions. The
     steering committee members will be selected from diverse groups such as logistics service
     providers, related service providers, and service users to ensure a fair mediation as in governance

     4.9 Value-added Service Provider

      In addition to logistics service providers and related service providers, dKargo needs value-
     added providers that support the seamless operation of dKargo. Value-added service providers’
     businesses are either directly or indirectly connected to the dKargo platform. They provide
     value-added services that dKargo alone finds challenging to provide to participants. As of now,
     settlement service providers, insurance service providers, and information service providers are
     dKargo’s main value-added service providers. In the future, dKargo will be able to attract more
     additional service providers as the platform grows.

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Settlement service provider


                                                    Smart Contract

                                         Settlement service provider

      Settlement service providers offer flexibility in dKargo’s platform. They convert DKA tokens with
     fiat money and also fill the time gap between when the payment order was placed and when
     the final settlement was made. Participants can select settlement service providers to settle the
     balance when there are different preferences for the payment methods between the parties. In
     this case, dKargo will include the settlement service provider in the smart contract to ensure that
     each party will receive payment in the manner of their choice. For example, if a service user wants
     to pay by credit card and the service provider wants a portion of their payment to be made in DKA
     tokens, the settlement service provider will receive the full payment via credit card. The settlement
     service provider will then pay the service provider in the payment method of their choice. Each
     settlement service provider will decide what their conversion rates and settlement fees will be,
     and participants can select the settlement service providers of their choice. Competition among
     settlement service providers will help provide more efficient service to platform participants and

      Settlement service providers earn revenues through settlement fees and arbitrage trading of
     when a payment order is placed and when the actual payment is made. Logistics service by
     nature can be very time-consuming. Which means, that there can be a big time gap between
     when the payment order is placed and when the actual payment is made, which creates room
     to develop new revenue models based on various financial techniques. This allows settlement
     service providers to test many business models and hence, provide an efficient settlement that fit
     the needs of each participant.

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dKargo’s settlement service providers must handle both DKA tokens and fiat money. So, it is
     likely that existing cryptocurrency market players such as cryptocurrency exchanges and financial
     institutions with existing payment structure will be the biggest participants on the platform’s early

       Insurance service providers

                           Provide services


                           Send payment

                                                        %                             Insurance
                                               Pay insurance premium               service provider

      Insurance service providers vouch for dKargo participants in case they sign more contracts than
     the amount of tokens they staked. Also, insurance service providers ensure contract performance
     guarantee on behalf of participants. Participants can increase the number of contracts they can
     sign at the same time through insurance companies as they will provide contract performance
     guaranteed. The insurance service provider will receive tokens as premium.

      Insurance service providers will provide compensation if the participant fails to fulfill a contract or if
     the freight is damaged. To ensure that insurance service providers can provide compensation, they
     too must stake a portion of their tokens. Insurance service providers are no exception to signing
     contracts proportionate to the number of tokens they staked. Insurance service providers can adjust
     the premiums for each participant according to the participant’s transaction history and maximize
     their revenue by doing so.

      Insurance service providers play an important role in the platform's growth. As the platform's
     freight traffic increases, second movers will have to increase their initial capital investment to join
     the platform. However, this is a leading cause of discouraging second movers to join the platform
     and will become a major obstacle to the platform's growth. Insurance companies will help second
     movers to join the platform at a lower cost and help the platform's growth. dKargo won't be a
     platform for a select few early movers but will be available for all participants of the logistics industry
     to gain value.

22                                                                          dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
Data service providers

     Data service providers create values by utilizing the data on dKargo. They manufacture raw logistics
     data to create values. dKargo participants receive relevant data they need from their data service
     providers and pay them with DKA tokens.

      Data service providers contribute to the platform by recommending the optimal logistics route for
     each order and providing information to participants that can help raise their efficiency. Outside
     the platform, data service providers organize and analyze the big data on dKargo. The data is then
     refined to be a data product and helps the data transaction market to function better.

23                                                                     dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
5   dKargo’s Economic Model

         5.1 DKA Token

          dKargo platform issues DKA tokens for participants’ interaction on the platform. DKA tokens
         are cryptocurrency based on blockchain technology. They can be traded through exchanges and
         converted into fiat money.

           DKA tokens can be used for all transactions made on the platform, including providing
         incentives to participants for voluntarily providing data, cost for data use and dispute mediation,
         payment for services, and guarantees for contract fulfillment. The value of DKA tokens will rise
         in proportion to the platform’s growth. This is because there will be more logistics traffic handled
         on dKargo, which will mean an increase in token demand. Also, more tokens will need to be
         staked for service payments and as a guarantee for contract fulfilments.

          DKA tokens are issued based on Ethereum’s ERC20 tokens. However, they may be changed to
         a different protocol depending on the platform’s needs. If there is a shift to a different protocol,
         the DKA tokens in circulation will be changed to tokens based on the new protocol.

         5.2 DKA Token Incentive Pool

          All dKargo platform participants will receive incentives for their participation in DKA tokens.
         The incentives will be paid from dKargo’s incentive pool. The incentive pool will be filled by
         transaction fees and reserves from the initial token issuing.



                       Platform                            Token pool
                   %   transaction fee

24                                                                         dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
A portion of the transaction fees from the platform will be reserved in the incentive pool to
     stably provide incentives to platform participants. This is to ensure that profits generated in the
     platform will be distributed to participants who provide quality service.

      Until the dKargo platform settles down, the incentive pool based on the transaction fees of
     the platform won’t be able to provide sufficient compensation to participants. As a solution to
     this problem, incentives will be paid from the tokens issued in the earlier stage. In the long
     term, there will be a sizeable incentive pool from transaction fees as the value of DKA tokens
     appreciates and as the platform grows larger.

     5.3 DKA Token Incentives Distribution

     Each participant will contribute to the platform by uploading relevant data. Participant’s data
     contribution is essential to the platform’s growth and those who provide more data make bigger
     contribution to the platform’s growth.

     The incentives are going to be distributed all differently according to the data’s value provided to
     the platform. The value of the data will be determined by considering the influence each data had
     on the platform and its relative value compared to the accumulated data. Various factors such as
     freight traffic, frequency, cycle, trait, and credibility are taken into consideration when calculating
     the data’s value. dKargo is going to adjust periodically how the data’s value are weighted. This
     will create participants attraction in the earlier stage when the amount of accumulated data on
     dKargo is relatively small.

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6.    dKargo Technology Description – Key elements

          6.1 dKargo Platform Structure

           dKargo’s platform is consist of three layers: the storage layer, the middleware layer, and the
          service layer.

                                                       Service layer

                                      Storage                 Payment            Insurance                 Linkage

                                                   Middleware Layer

                        Indexer                 Auth                    Info Retrieve                  Trade

                                                       Data Router

                                                       Storage Layer

                                  Blockchain                                Distributed Data Storage

                             Contractual          Freight          Reputation            Available            Reference for
          Blockchain         information        information        information           resources             distributed
                                                                                        information            data storage

26                                                                                  dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
Storage Layer (Core Layer)

      The storage layer is the foundation of dKargo, where all the major data about the freight and
     participants are stored. The storage layer has two main components, the blockchain and external
     data storage. The data will be saved into one of the components based on its trait and importance.

      Data that is fundamental to collaboration will be recorded on the blockchain. It is to ensure
     data credibility and prevent data tampering and any data loss that may come from central
     server failure. Data such as contractual information, the location and status of freight at each
     stage, participant’s reputation and available resources will be recorded on the blockchain. The
     blockchain that dKargo uses is one based on Ethereum, which is currently the most widely
     used and proven protocol. However, in the future, dKargo may switch to new-generation main
     protocols such as Kakao Klaytn.

      The external data storage stores larger data that is needed for service operation. This will
     enhance service operation efficiency while solving the problem of blockchain’s slow speed. For
     example, data that has value but is not a necessity such as pictures of freight and warehouse
     CCTV clips will be stored on the external data storage. dKargo will use widely used storage
     systems such as database and AW3 S3 (Amazon Web Services Simple Storage Service) to
     help incumbent participants adjust to the platform. If it is required, dKargo will consider using
     distributed storage technology.

      Among the data that dKargo needs, some can be made public while others need to be private.
     If personal information such as data on the shipper and consignee are revealed, it would be
     a violation of privacy. And if detailed data on freight is made public it can become a target of
     crime. This calls for dKargo to categorize recorded data into two sectors. Data that can be made
     public will be recorded on the smart contract to increase efficiency. While data that must be kept
     private will be encrypted and can only be viewed by participants of the contract.

       Middleware Layer

     The middleware layer is an interface that reads and records the data stored on the storage layer.
     dKargo’s diverse services can be accessed on the storage layer through the middleware layer.
     Participants can use various tools that the middleware layer provides to easily connect their
     services to the dKargo platform.

      dKargo platform can only succeed when the participants of the current logistics network can
     easily join the platform. dKargo will provide SDK (Software Development Kit) to many service
     providers currently in operation, to help them connect their services to dKargo’s platform.
     SDK will be designed to be compatible with existing programming techniques. This will help
     developers who aren’t familiar with blockchain technology to easily participate in the platform.

      The middleware layer will also provide extra data on specific information for logistics services
     such as the standard specification of freight information, regulations in each country, and
     standards for payment. This is to help participants gain easier access to data they need to provide
     their services. It will help existing service players to enter the platform.

27                                                                     dKargo |   Decentralized and Cooperative Protocol for Next Generation Logistics
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